Despite the increasing popularity of cryptocurrencies, particularly Bitcoin, only 1% of financial advisors frequently discuss crypto investments with their clients. This reluctance is primarily due to concerns about potential legal liabilities and associated expenses if the investment goes wrong. According to CoreData’s report, 89% of financial advisers have never provided advice on cryptocurrency, with one of the main reasons being the lack of coverage by professional indemnity insurance. The absence of clear regulations, prevalence of scams, limited information compared to traditional assets, and the lack of historical performance data also contribute to advisers’ hesitance in discussing cryptocurrency with their clients.
CoreData believes that advisers’ avoidance of the cryptocurrency market presents an opportunity for advisory firms to specialize in or enhance their understanding of this emerging asset class. With financial advisers starting to allocate around 3.5% of a client’s portfolio to Bitcoin, if this practice becomes more widespread, the inflows into crypto could be significant, reaching trillions of dollars. Interestingly, the survey revealed that 67% of crypto holders expressed interest in receiving professional advice on the subject, with the highest demand coming from individuals who hold cryptocurrency due to their belief in its potential for value appreciation or concerns about inflation. As younger generations, who are more digitally savvy, enter the market, the demand for digital assets, including cryptocurrencies and tokenized real-world assets, is expected to rise, making expertise in blockchain-based assets crucial for future-proofing advisory practices in Australia.
In a move that reflects the growing interest in cryptocurrencies, Morgan Stanley is considering expanding its sales of Bitcoin ETFs by allowing its 15,000 brokers to actively recommend these products to customers. Currently, the firm offers Bitcoin ETFs on an unsolicited basis, meaning customers must approach their advisors independently to express interest in investing. By enabling advisors to actively recommend these products, Morgan Stanley could potentially broaden its customer base, although it would also expose itself to additional liability. Some financial institutions, such as Raymond James Financial and Vanguard, have chosen not to offer cryptocurrency products, citing concerns about their suitability for long-term portfolios. LPL Financial, the largest independent brokerage with over 22,000 brokers, announced plans in February to evaluate which Bitcoin funds it could offer to customers.
Overall, the reluctance of financial advisors to discuss cryptocurrency with their clients presents both challenges and opportunities for the industry. While concerns about legal liabilities and lack of regulatory clarity may deter some advisors from exploring the cryptocurrency market, there is a growing demand for professional advice on digital assets. For advisory firms willing to develop their expertise in blockchain-based assets, there is an opportunity to attract new clients, particularly those interested in cryptocurrency investments. As the market for digital assets continues to expand, building competency in this area becomes essential for future-proofing advisory practices and catering to the evolving needs of investors, especially younger generations who are increasingly interested in cryptocurrencies and tokenized assets. In this changing landscape, financial institutions like Morgan Stanley are adapting their offerings to meet the demand for cryptocurrency investments, indicating a shifting attitude towards digital assets in the traditional financial industry.
